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Analyzing the Welfare Impacts of Full-line Forcing Contracts

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  • Justin Ho
  • Katherine Ho
  • Julie Holland Mortimer

Abstract

Theoretical investigations have examined both anti-competitive and efficiency-inducing rationales for vertical bundling, making empirical evidence important to understanding its welfare implications. We use an extensive dataset on full-line forcing contracts between movie distributors and video retailers to empirically measure the impact of vertical bundling on welfare. We identify and measure three primary effects of fullline forcing contracts: market coverage, leverage, and efficiency. We find that bundling increases market coverage and efficiency, but has little impact on one distributor gaining leverage over another. As a result, we estimate that full-line forcing contracts increased consumer and producer surplus in this application.

Suggested Citation

  • Justin Ho & Katherine Ho & Julie Holland Mortimer, 2010. "Analyzing the Welfare Impacts of Full-line Forcing Contracts," NBER Working Papers 16318, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:16318
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    References listed on IDEAS

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    1. Whinston, Michael D, 1990. "Tying, Foreclosure, and Exclusion," American Economic Review, American Economic Association, vol. 80(4), pages 837-859, September.
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    7. R. Preston McAfee & John McMillan & Michael D. Whinston, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 371-383.
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    Cited by:

    1. Katherine Ho & Justin Ho & Julie Holland Mortimer, 2012. "The Use of Full-Line Forcing Contracts in the Video Rental Industry," American Economic Review, American Economic Association, vol. 102(2), pages 686-719, April.
    2. Kuroda, Toshifumi & Ida, Takanori & Koguchi, Teppei, 2015. "The impact of asymmetric regulation on product bundling: The case of fixed broadband and mobile communications in Japan," 2015 Regional ITS Conference, Los Angeles 2015 146318, International Telecommunications Society (ITS).

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    More about this item

    JEL classification:

    • L0 - Industrial Organization - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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